Jumbo Loan Refinances: A Complete Guide

Leandro Mortenegro

Refinance Jumbo Loan Requirements

Lenders that offer jumbo mortgage refinances have stricter requirements compared to conventional, FHA or VA loans.

Thoroughly consider the following requirements before applying for a jumbo loan refinance.

Credit Score

Your credit score is a three-digit number that shows how successfully you handle debt, both currently and in the past. For 30-year fixed-rate loans, the average median credit score accepted by most lenders that offer refinance for jumbo loans is a 680. For 15-year fixed loans and ARMs, you’ll need a credit score of 700 or higher. You may need a 760 credit score if you’re not refinancing a primary residence or single-family home  for investment properties or rental properties.

Debt-To-Income Ratio

Your debt-to-income (DTI) ratio tells your bank or credit union how much of your monthly income you use to pay recurring bills, such as your mortgage payment, minimum payments on credit cards, student loans, personal loans and auto loans. They use this as a yardstick to assess your risk as a borrower. You present more risk to a lender if you have a high DTI. In most cases, you must have a DTI of no more than 36%.

Payment History

You will also need to have a clean payment history, without late or missing mortgage payments or recent bankruptcies in order to secure a jumbo refinance loan.

Home Equity

Lenders will require you to have a certain amount of home equity before they will consider a jumbo refinance. Some types of jumbo refinancing, such as cash-out refinances, might require more equity than others. Your jumbo refinance depends on your current home value. Most lenders require you to have a certain loan-to-value ratio (LTV) that measures the appraised value of a home against the amount you want to borrow.

The appraised value of a home is the home’s market value. Since most lenders require you to leave 20% – 30% of your equity in your home once you refinance your jumbo loan, you may not qualify for a cash-out refinance if you’re still in the early years of your loan term. 

Liquid Reserves

Borrowers with a jumbo loan will need cash reserves. Cash reserves refer to excess money that you have in the bank and in investments. Your lender needs to know that in cases of financial hardship, you will be able to make your monthly payments. Cash reserve amounts vary by lender but at Rocket Mortgage®, you’ll have to have 6 months’ worth of cash reserves on hand for loan amounts below $1 million. Loan amounts over $1 million require a year of cash reserves.

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